The ruble leapt a stunning 70 points against the dollar Wednesday, with interpretations of the currency's continuing growth ranging from confirmation of the government's tight fiscal policy to a harbinger of a ruble crash to come that would rival Black Tuesday of October 1994.


Trading was heavy at $502 million, with the ruble finally settling at 4,766, up from Tuesday's 45-point jump to 4,836. Russia's national currency has now risen 7 percent above an April 29 all-time low of 5,130 to the dollar.


The sharp rise came despite a change in Central Bank strategy, when it stepped away from supporting the ruble Wednesday and instead bought $300 million worth of dollars, a move many viewed as an effort to ease the market's volatility.


But the dramatic increases have left many traders and analysts with more questions than answers.


"Everyone understands that it is a temporary phenomenon," said Yevgeny Rogachev, head of exchange operations for Menatep Bank. "No one believes that it is a final stabilization. ... People are already panicking."


Experts have said the ruble's rise may be linked to efforts by commercial banks to cash in dollars for rubles and invest the earnings in high-yielding domestic securities.


Also, contrary to the bank's buying of dollars Wednesday, some suspect the Central Bank has been acting to force up the ruble to state its independence from the Duma prior to Friday's vote on whether to confirm or reject the bank's acting chairwoman, Tatyana Paramonova. Paramonova's refusal to print new money or hand out subsidies has angered some conservative lobbies in the Duma, the lower house of parliament.


Russia's financial leaders have sounded like World War II generals of late, with Deputy Prime Minister Anatoly Chubais stating emphatically last week his intent to drive the dollar from the Russian market.


Likewise, Deputy Economics Minister Sergei Vasilyev declared "victory over inflation" on Wednesday. But traders and financiers remained confused about how far the Central Bank would go in its support of the ruble and its ultimate effect on the raw materials export-based economy.


"I think there's a lot of bewilderment on how long this will last," said Miljenko Horvat, president of Citibank-Russia. "I haven't seen anyone slapping high fives saying this is great, or anyone saying this is a disaster. I see people saying, 'Well, this is unprecedented, but what does it mean?'"


The bank's reverse tactic of buying dollars rather than selling them did little to soothe anxieties, but it may indicate an effort to keep the ruble within a specific range, Horvat said.


Economists agreed, noting that a rapid revaluation of the ruble with no checks by the Central Bank may help fight inflation, but would run the risk of creating volatility and ultimately lead the ruble to crash.


"This is the most risky time of the disinflation process," said Charles Wyplosz, economics professor at the French business school INSEAD. Wyplosz told a press conference Wednesday that inflation has fallen more than half since the start of the year. As inflation continues falling, the government needs to provide alternative sources of ruble-denominated investments such as bonds.


"What we see is the first sign that the stabilization program is becoming credible," he said. "At some point de-dollarization has to start, and the moment is now."


Others, however, were not so bullish.


"A strong national currency and high inflation combined will result in the ruble's inevitable crash," said Sergei Zatsepilov, head of Inkombank's analysis department. He added that the public is being lured to the ruble by government statements that the currency will continue rising.


"The crash will have an impact on broader layers of the population and its results will be more dramatic than those of Black Tuesday," Zatsepilov said, referring to Oct. 11, when the ruble fell nearly 28 percent.


While Vasilyev argued that the Central Bank has the reserves to fend off a repeat of the October scare, anxiety continued over the rising ruble, which will likely have its greatest effect on Russian exports, which are mostly in raw materials that have world-market rates.


In the current market, a 4 percent ruble appreciation against the dollar over 30 days would raise the value of a typical 195 percent ruble loan rate to the equivalent of 250 percent, according to Thomas Reed, an analyst with AIOC.


In addition to making foreign products cheaper, the stronger ruble will increase the cost of ruble loans to manufacturers dependent upon export dollars.





-- Natasha Mileusnic contributed to this report